Question
Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers
Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.
Activity Pool Department Costs Cost driver
Binding $247,500 Number of units
Printing 798,000 Machine hours
Product design 191,250 Change orders
General 608,250 None
Total overhead costs$1,845,000
Other information is as follows:
Tablets Books
Units 75,000 18,750
Direct materials cost per unit $4.00 $12.00
Direct labor cost per unit $5.00 $10.00
Direct labor hours 30,000 15,000
Machine hours 150,000 112,500
Change orders 1,875 3,750
(A) Determine the unit product cost for Tablets using the traditional costing system.
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